Inheritance Tax and Estate Planning

Inheritance Tax

At the moment Inheritance Tax is a ‘Voluntary Tax’. This means that it may be avoided or reduced if the right plans are made in good time.

Each individual currently has a ‘nil rate band’ (Inheritance Tax exemption) of £325,000.00 which means that if the total assets you have are less than this threshold there is no Inheritance Tax to pay.

If you own property then you may also be eligible for a further exemption of £175,000.00 known as the Residence Nil Rate Band, although certain criteria need to be met to obtain this.

Monies above these thresholds are currently taxed at 40% where the assets are not passed to a surviving spouse.

Taylor Withers & Company can offer advice as to how best to use your assets to remove or minimize the amount of Inheritance Tax paid or look at life insurance, if appropriate, to help pay potential Inheritance Tax where this is not avoidable.

Insurance

There is also the option of purchasing an insurance policy to help pay an inheritance tax liability and we would be able to advise and source an appropriate policy should this be required.

At Taylor Withers and Company we will look at all the options available to help choose the best way to achieve the goal of mitigating or paying inheritance tax where possible.

Make a Will

It is important to ensure that you have a Will and if one is already in place that it is up to date.

In its most basic form the reason a Will is written is to ensure that assets are passed to the right people on the death of the owner of those assets.

Used properly, a Will could help to mitigate the effects of Inheritance Tax for the following generations, or might help protect against the problems of losing assets to long-term care costs.

Trusts

There are different types of Trusts that may also be appropriate, depending on your circumstances and these could include:

Usually in conjunction with a Will (although not always)

• Discretionary Trust
• Interest in Possession Trust (commonly known as a Life Interest Trust)

Stand alone

• Loan Trust
• Gift and Loan Trust

At the same time, it may be appropriate to make gifts whilst a person is still alive. If an outright gift is made then, providing the donor (person who makes the gift) survives for at least 7 years after the date of the gift, the assets are deemed to be outside the estate and will not attract any inheritance tax on the donor’s demise.